Valve maker VAT cuts worker hours as semiconductor demand slumps

3 Min Read

* Trade tensions may be slowing investment

* VAT says wave of investment resulted in overcapacity

* Swiss valve maker to cut hours, says outlook remains intact

ZURICH, Oct 10 (Reuters) - Swiss vacuum valve maker VAT Group, which supplies equipment to the semiconductor industry, said it was cutting working hours at a factory because demand from customers had slumped, sending its shares tumbling on Wednesday.

German chip factory builder Exyte has shelved plans to float on the Frankfurt stock exchange this month, while Applied Materials, a VAT customer, in August issued a weak forecast, foreshadowing the end of the two-year chip boom.

Shares in VAT were down 10 percent by 0902 GMT after the company said about 400 workers at its site in Haag in northwestern Switzerland will start working shorter hours from Oct. 15 until the end of the year at least.

Semiconductor makers are scaling back activity or delaying projects following a period of large-scale investment, leading to a correction that VAT Group flagged earlier this year. Orders in the second quarter had fallen 13 percent, it said in August.

“VAT expects continued growth in its major markets but at a more moderate pace, reflecting in large part the push-out of several large semiconductor and display (manufacturing) expansions to later dates,” the company said.

Switzerland has rules governing when companies can temporarily shorten working hours, part of measures aimed at managing fluctuations in demand without jettisoning qualified workers.

Zuercher Kantonalbank said trade conflicts including between the United States and China, where VAT is expanding its presence, also weighed.

“A quick resolution of trade conflicts could take the brakes off certain investment projects,” analyst Alexander Koller wrote in a note to investors.

A VAT spokesman said that trade tensions may be playing a “small” role in investment decisions, but pegged the main culprit behind the company’s orders slump as a “small production overcapacity” following the recent wave of investment in manufacturing.

Goldman Sachs in September lowered its outlook for the semiconductor capital equipment space, saying an oversupply would limit expenditures.

Elsewhere in Europe, Sweden’s Atlas Copco, which also operates in the sector, fell 3.5 percent in Stockholm.

VAT said its overall outlook remains healthy, given rising digitalisation and other trends that point to a demand recovery. “VAT expects its markets to regain a healthy growth trajectory,” it said. (Reporting by John Miller, editing by Louise Heavens)